BUSINESS ETHICS

AND SOCIAL
RESPONSIBILITY
Q3 WEEK 1
 B
U
E
S
The Role of Business in Social I
T
H
N
and Economic Development E
I
C
S
S
S

Differentiate the forms of business organizations in

terms of their purpose and role in socio-economic Q3
development. WEEK 1
Codes: ABM_ESR12-IIIa-d-1.1; ABM_ESR12-IIIa-d-1.2; and ABM_ESR12-IIIa-d-1.3
 B
U E Business ethics refers to the principles and values that guide
S T the behavior of individuals and organizations in the business
I H world.
N I It involves making moral and ethical decisions within the context
E C of business activities, considering the impact on various
S S stakeholders such as customers, employees, suppliers, and the
S broader community. Business ethics addresses issues such as
honesty, integrity, fairness, transparency, and accountability in
business practices. Companies that uphold strong business ethics
Q3 aim to operate in a morally responsible manner, beyond mere
WEEK compliance with laws and regulations.
1
 R
Social responsibility in business refers to a company's
E
commitment to act ethically and contribute positively to
S society.
P
S It involves considering the environmental, social, and
O
O N
economic impacts of business operations and taking steps to
minimize negative consequences. Socially responsible
C S
businesses go beyond profit-making goals and actively engage
I I in activities that benefit the community, the environment, and
B
A other stakeholders. This may include initiatives related to
I sustainability, philanthropy, community development, ethical
L L sourcing, and fair labor practices. Socially responsible
I businesses recognize their role in the broader social fabric and
T strive to make a positive impact on the world around them.
Y
B A business is an organization, economic system, or
U enterprising entity that is engaged in commercial,
S professional, industrial activities and operates in
I exchange for one another or of money. It produces
N goods or offers services to satisfy the needs and wants
of society. Business, then, operates with people working
E
together to meet a common goal (which is to earn a
S profit).
Profits in business are not necessarily money. It can be a
benefit in any form which is acknowledged by the
business (entity) involved in the business (activity).
 O
R Basic Forms of Business
F G
O A
Organization
R N A business organization is an entity
M I
S Z formed to carry on commercial
A enterprise. There are four different
O T
F I types of business organization that is
O to be discussed in this lesson.
N
 O
R
F G
O A
R N
M I What are the forms of Business
S Z Organization?
A
O T
F I
O
N
 O
R
F G
Single/Sole Proprietorship,
O A
R N Partnership,
M I
S Z Corporation,
A and
O T
F I Cooperative.
O
N
 O
R Single/Sole Proprietorship
F G 1. Single Proprietorship - A sole proprietorship as the
O A name implies is a business owned and operated by
R N only one person for their benefit. The owner and the
M I business are considered the same. Moreover, there is
S Z no legal separation between the two when it comes
A to taxes and liabilities and of course assets and
O T profits. That is why sole proprietorship has unlimited
F I liability for all of its obligations because of this kind
O of condition but also has all the rights when it comes
N to assets and profit incurred by the business.
 P Advantages of Sole Proprietorship
R
S
O A. The Easiest and inexpensive to put up
I
P
N
R B. All profits will go to the owner
G
I
L
E
C. Complete and direct control of the
E
/
T business
O
S
O
R D. Freedom from government regulations
S
L
H E. No special taxation
E
I
P F. Easy to dissolve if desired
 P
S
R Disadvantages of Sole Proprietorship
O
I
P A.Unlimited liability
N
R
G
I B. Difficult to raise capital or additional capital
L
E
E C. Limited managerial expertise
T
/
S
O D. Has a hard time finding qualified talents
R
O
S E. Consumes personal time
L
H
E
I
F. Unstable business life
P
P Partnership
A
According to The Philippine Civil Code Art. 1767, it
R
defines partnership as “By the contract of partnership
T
two or more persons bind themselves to contribute
N money, property, or industry to a common fund, to divide
E the profits among themselves.
R
The partners should then decide on how the decision
S
should be made, the amount of capital each partner will
H
share and the percentage of profit/losses sharing, and
I other related concerns regarding the firm that the
P partners want to put up.
P
A
R Advantages of Partnership
T A. Ease of Formation
N B. Availability of capital
E
R C. Diversity of expertise
S D. No special taxes
H E. Relative freedom from government control
I
P
P
A
R
Disadvantages of Partnership
T
N A. Unlimited liability
E B. Conflicts between partners
R C. The complexity of profit-sharing
S
D. Limited life
H
I
P
 P
T
A
R
Types of partnership
Y
P
T
N
1.General Partnership
E
S
E
R
2.Limited Partnership
O
S
H
3.Limited Liability
F
I Partnership
P
 P
T
A
R
Types of partnership
Y
T 1. General Partnership – in a general
P
N partnership, all partners agree to have
E
E
S unlimited liability. It means that when
R
S the company is bankrupt, the personal
O assets of partners can be used to pay the
H
F
I remaining debt of the firm.
P
 P 2. Limited Partnership- as to the term
A “limited” it means that the liability of
T
R
Y
T
partners is bounded only within their
P capital/investment in the company. Their
N
E
E assets are secured and will not be used
S
R to pay for the company’s debt. But there
S
O should at least one partner that is
H
F
I
considered a general partner and be the
P one who has unlimited liability.
 P 3. Limited Liability Partnership- this type
A of partnership is common only to
T
R
Y
T
professional service businesses such as
P doctors, lawyers, accountants, engineers,
N
E
E architects, and other professional fields.
S
R Their personal assets are protected for
S
O business’ debts and liabilities but do not
H
F
I
protect the personal assets of partners
P for malpractices.
C A corporation is defined as “A corporation is
O an artificial being created by operation of
R
law, having the right of succession and the
P
O
powers, attributes, and properties expressly
R authorized by law or incident to its existence”
A as stated in the Batas Pambansa Blg. 68 also
T known as The Corporation Code of the
I Philippines.
O (https://www.officialgazette.gov.ph/1980/05/01/batas-
N pambansa-bilang-68.)
C
O Owners of a corporation are called
R shareholders (for Stock Corporation)
P and members (for Non-stock
O Corporation). The corporation is
R
A
considered as a unique entity, separate
T and apart from those who own it. A
I corporation itself can be sued, taxed,
O and enter into a contractual agreement.
N
C
O
R
The difference between shareholders and
P stockholders is that a shareholder buys
O shares from the company, and they invest
R their money in buying those shares, while
A stockholders buy stocks from a particular
T company or purchase them from a stock
I market.
O
N
C
O
R Stock represents the holder's
P
O
part-ownership in one or several
R companies. Meanwhile, share
A
T refers to a single unit of
I ownership in a company.
O
N
 C Advantages of Corporation
A
O Limited liability- unlike sole proprietorship and partnership, a
D corporation has limited liability because a corporation is a
R
V unique and separate entity from the owners. The assets of the
P company alone are the only way to pay for all the debts the
A firm incurred or once the company goes bankrupt.
O
N O Ease of transfer of ownership- stockholders can sell their
R shares without affecting the status of the corporation.
T F
A Unlimited life- there is a life term for the corporation but it
A can be renewed. In case one of the owners of the company
T
G died, it will not affect the existence of the business.
I Raise additional funds- the company can raise funds by
E
O selling new shares of stocks. Also, it is easy for them to apply
S for bank financing especially if the company is stable and
N profitable.
 O
D
F
Disadvantages of Corporation
I Double taxation- The corporation must pay tax for
S
C the profit and at the same time, the dividends given
A
D
O to shareholders are also being taxed as personal
R income.
V
P
A Cost and complexity of formation- establishing a
O
N
R
corporation takes a lot of time, effort, and money
T than other forms of organization.
A
A
G
T Government restrictions- corporations are
E
I monitored by the government and are subject to
O many regulations and reporting requirements.
S
N
 Limited Liability Corporation (LLC) Limited
C
L O liability companies are a hybrid business that has
L I R characteristics of both corporation and
I A P
M B
partnership. An LLC is a separate entity like a
O
I I R corporation that conducts business and owns
T L A assets. There is no restriction on the number of
E I T
members (owners referred to as members). The
D T I
Y O owners have limited liability because of its
N distinction with the company but are taxed like a
general partnership
 O
D
F Advantages of Limited Liability Corporation
I C
S L Limited liability- the business is a separate entity from the owner
C O that is why personal assets of owners are restricted from the debt
LA IO R of the business.
ID AR P Pass-through tax structure – income from your business can be
MV BP O treated as your personal income.
A
I IO R Organizational Freedom- there are no restrictions when it comes
TN LR A to the number of members.
ET IA T Limited regulations- the business is not required to abide by some
DA TT I regulations implemented in a corporation business such as record
G Y O keeping, board meeting, and administrative duties of the
I
E corporation.
O N
S
N
 O
D
F
I C Disadvantages of Limited Liability Company
S L O
C Building Capital –limited liability corporation
LA IO R
ID AR P as a form of business is not that popular so
MV BP O investors are not convinced to invest their
A
I IO R money in this kind of company.
TN LR A
ET IA T No perpetual existence – this form of business
DA TT I organization will cease to exist once one
G Y
E
I O member of the company died or withdraw.
O N
S
N
 O
D
F Cooperative
IC
SO Cooperative is well-known as “co-op” that
C
AO
O is organized for-profit and non-profit. It is a
DP
VE
R form of business organization with members
P
AR
O
working together toward a common goal for
NA
TT
R their mutual benefit. The main purpose of
A
AI
T
cooperative business is not merely for
GV
EE
I making profit but to provide goods or
S
O services at a reasonable price.
N
D
O Cooperative
F As defined by the Cooperative Development
IC
SO
C Authority, “A cooperative is an autonomous and duly
AO
O registered association of persons, with a common
DP
VE
R bond of interest, who have voluntarily joined
P
AR
O
together to achieve their social, economic and
NA cultural needs and aspirations by making equitable
R
TT
AI
A contributions to the capital required, patronizing
T
GV
I
their products and services and accepting a fair
EE share of risks and benefits of the undertaking per
O
S
N the universally accepted cooperative principles.”
 O
D
F Advantages of Cooperative
IC 1. Ease of formation – it only needs 15 members to be able to apply for a
SO cooperative business and needs just simple legal documentary requirements.
C 2. Voluntary organization – it is open for all, so anybody who wants to be one
AO
O with the common goal of the organization can be a member. The membership
DP fee is kept low so that anyone can join and of course, any member also has the
R
VE freedom to exit anytime without barrier.
P
AR 3. Separate entity- the cooperative is distinct from its members. The cooperative
O business is a separate legal entity from its members. Whenever a member exits
NA
R or dies, the business continues with the operation
TT 4. Limited liability- members’ liability is up to the extent of their capital only. They
A
AI are not accountable to debts of the cooperative itself.
T 5. Government support- government supports this kind of business and they offer
GV
I a loan that has lower interest rates and provides subsidies.
EE
O 6. Low taxes- government provides various tax exemption.
S
N
 O Disadvantage of Cooperative
D
F 1. Limited Capital- the rate of return of capital is low that is why it is difficult to
IC raise funds.
SO 2. Inefficient management- members of management are not efficient in handling
C the cooperative because they are inexperienced. It also difficult to find a
AO
O qualified management team because it cannot offer competitive salaries and
DP benefits.
R
VE 3. Lack of interest- paid-members are not motivated to function well because their
P
AR interests are not fully satisfied. In effect, the cooperative becomes inactive.
O 4. Corruption- because of a lack of profit motive, some members try to make
NA
R misuse of some funds for personal gains.
TT 5. Government Intervention- all of the daily operations of the business are
A
AI subject to the rules and regulations of the government. Regular bookkeeping
T and monitoring are mandatory to cooperative business.
GV
I 6. Conflict among members- because of their differences, some members are
EE
O having issues with other co-members that create disharmony among them. Some
S also feel like controlling the whole organization.
N
Q
U
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